Telcos, Tollcos

On April 28th, this year, Secretary Mary Peters spoke at The Brookings Institution. There she said that congestion in America is worse than ever; that it will continue to get worse; that the gas tax is unresponsive, unsustainable, and unpopular; and that Americans will not agree to increase that gas tax. She added that the “brass-ring opportunity we have before us is to substantially change that system and move forward to something that is more user responsive and more market-based.”

Later in response to a question, Secretary Peters, said that HOT lanes are an interim measure “…a stepping stone to get people acclimated to paying a fee for use of a section of roadway at a peak period of time.” And that here in America we will eventually go to a “vehicle miles traveled (VMT) form of pricing”, by which she means the same thing as the Europeans mean by Time-Distance-Place (TDP) charging. When I asked later how far away that might be, she said “some states cannot wait more than ten years”. The AASHTO Journal in both April and May of this year puts the date for a switch-over to VMT at 2025.

USDOT and Secretary Peters do NOT see market pricing as a way to maximize revenue, rather as a way to maximize network performance – i.e., if we can price to reduce congestion, sufficient funding and somewhat cleaner air will naturally follow.

Given this rapid awakening of Americans to the need to switch to TDP pricing, the American prediction that this will occur somewhere between 2018 and 2025 coupled with the European prediction that it is between 2011-2020 and predictions by many other countries for times in between, this thing might be well past half-way done by 2020.

But what thing?

The EU has declared GNSS to be the only known technology that can feasibly apply TDP pricing everywhere; if the transportation leadership in America sees HOT as interim and sees GPS as the endgame, then we are talking GNSS-tolling in a big way – perhaps 300M vehicles worldwide by 2020.

How is that going to be done? For the US, "ten years" is awfully close. The experimentation, cross-vendor bake-offs and standards bodies in the EU are in a dead heat to be ready for the 2011 kickoff by the Netherlands which has 9M vehicles against Americas 250M. Right now the EU schemes on the drawing board are still expensive; they demand a massive telecommunication commitment, either sophisticated heuristic map-matching at the dashboard or massive amounts of raw data moving to a central processing area. There is nothing on the drawing board that will network to support 300M vehicles. So far we are at 640,000 trucks in open sky in Germany – 0.21% of what is being predicted for 2020.

What will we do here in America? We could assume the Europeans will solve it, then import their technology? Is that what we want? And what if they don’t solve it?

So far as I am aware, the GPS-tolling experiments executed in America have not sought to solve the problem of tolling using Liability Critical GPS as some of those in the EU have addressed – albeit unsuccessfully so far. Rather these experiments use navigation-quality GPS receivers to test user acceptance, state boundary detection, and user modal adaptability. The Europeans have shown repeatedly in Copenhagen, in London, in Amsterdam and in several other cities that navigation grade GPS will not work in our cities due to signal interference.

Let’s assume the problem of low-cost Liability Critical GPS will be solved and shared around the globe. This is a reasonable gamble, since one company already claims this. Still how would such a system be deployed?

What we want to do is:

• put a small device that includes GPS in a few hundred million vehicles,
• measure road use in small time, distance and place increments,
• log that use privately – maybe even anonymously,
• move that data wirelessly to a billing capability,
• generate bills for many tens of such small transactions, perhaps hundreds per month per user,
• set up credit, debit, and pre-paid accounts for these users,
• handle device fulfillment, customer support, troubleshooting, device repair and replacement
• make sure motorist driving in an area far away from their home RUC provider can “roam” on the roads of another provider and have the transaction handled seamlessly.

This mimics exactly what the Telcos do now. There are two differences; first the device meters road use instead of handling voice and email, and second it is attached to your windshield instead of your ear. Otherwise, the business of being a Road Network Tolling Operator is identical to that of being a wireless network operator.

The only organizations that can toll the entire United States on short notice are the Telcos. And 10 years is short notice. We should get started.

Intelligent Car Lobbyist

I know this is old news, but ya gotta wonder how a car lobby would ask for Road-Use Charging. How did they get so smart while so many politicians – like some in New York, recently, seem less so?

I copy it all here to be sure it is always available...

Car lobby calls for road-use charging
Shane Wright | theage.com.au | June 17, 2007

ALL motorists should carry a GPS-type transponder in their vehicles and, instead of paying fuel taxes, they should pay for every kilometre they drive, in varying amounts depending on what time they use the road.

This is the ambitious plan of the Royal Automobile Club, which is pushing the Federal Government and the Labor Party for an overhaul of fuel taxation.
The plan, backed by motoring groups, would work in a similar way to the way in which people are charged by phone companies depending on when they make a call, over what distance and how long it lasts.

Motorists would be rewarded for driving at off-peak times or in cars that used less petrol. Instead of the various taxes imposed on fuel, people would be charged on either their use of roads or on carbon emissions.

RAC member advocacy general manager David Moir said suggestions to change the way GST was applied to petrol would deliver, at best, cuts in petrol prices of about four cents a litre.

But a shift to a user-pays system would not only allow people to control the amount of tax they paid, but also enable governments to target carbon emissions from vehicles as well as congestion in large cities.

"This isn't a short-term fix, but a longer-term plan that could address a lot of problems," he said. "It sends the right price signals to people, so you can get a benefit on congestion, you can encourage people to drive the right type of vehicle and at the right time."

The technology to monitor vehicle movements is already available, with cashless motorways in both Melbourne and Sydney relying on electronic tags. Global positioning systems would enable exact measurement of the distances travelled by motorists.

But Mr Moir conceded there could be winners and losers from the system, and some motorists could have privacy concerns. (There are ways to protect privacy -- this is a common error due to a subtle confusion beween 'positioning' and 'tracking' /ed.)

Road Pricing Discounts

RUC discounting schemes have political acceptability as their core motivator, but location-based discounting can be complex, unfair and counterproductive. This article proposes an alternative that is simpler and fairer – one that addresses political acceptability while multiplying the pricing signals that motivate congestion-mitigation programming.

Some RUC (road-use-charging) cordon-based scheme designs provide discounts for those that live within a pricing cordon. This can be done intentionally, as is the case in London, or in the original New York City proposal. It can also happen by default with any scheme that only charges for cordon entry, since residents that travel locally or only re-enter after-hours will avoid the charge by fortune of geography and schedule.

In the face of unsustainable fuel taxes and contemplating more and larger charging schemes, up to and including continent-wide time-distance-and-place (TDP) charges, the question arises: “Can we provide a discount to motorists driving near their homes when we use a satellite-based, RUC system?”

Granting a “discount radius” to each motorist could accomplish this, but that increases the expense of the TDP charging computation. A slightly less expensive way is to assign discounts based on charging districts. However, I am generally against such discounts because I believe everyone should pay for what they consume. In an urban community we generally pay the same for utilities such as electricity or water regardless of our location and I think that should apply to mobility, as well.

Considering that discounts encourage consumption and tend to generate cross-subsidies, a more direct question to ask is: “Should we provide discounts for motoring?” or if we must discount, “Should we provide motoring discounts by geography, since that encourages automotive use in specific geographies, harming other residents sharing those locales?”

Geographic discounts say to motorists: “It is fine to drive as long as you are from here, but we’re going to charge visitors, since they contribute to congestion and to air-quality problems”. Such discounts can be seen as cynical, telling the local motorist: “We value your vote more than accessibility – or more than air quality.” Or “It’s not your car, it’s theirs.” Geographic discounts signal entitlement rather than conservation or increasing choices for mobility.

To the first question: “Should we provide TDP RUC discounts?”, there are at least two critical reasons to say yes:

1. It is politically easier to sell: “we will charge a very modest fee, perhaps only nominal, to those motorists who are rate payers here, who work, go to school and church here, who are part of our local commercial and social community; and we will charge a market rate to visitors, motorists in transit, and commuters who do not live here.”
   
   Since the essential hurdle to universal, fair market pricing for roads is political, this reason alone is sufficient to argue for discounts. But is geographic discounting the only political lever to get RUC programs in place?
   
   
2. Poorer motorists tend to drive fewer miles and closer to home. RUC fees, since they can compound the effect of increasing fuel prices, can serve to further exaggerate the have/have-not forces that constrain the mobility of poorer motorists). Hence a close-to-home RUC discount is biased in favor of poorer drivers and this is fair in that regard.
   
   This social reason is, in my opinion, sufficient on its own to force us to address discounting in some way.
   

Hence, I believe there are political and social reasons that make RUC discounting a critical conversation that we need to engage in now. Unfortunately, assigning discount by geography is expensive, unfair and counterproductive.

1. Expensive. Granting a discount radius from a point (e.g. your home) or assigning discounts by district would be administratively expensive.
   
   
2. Unfair. Person A and B are neighbors and live near the edge of a discounting “district”. Both live 5 miles from their respective jobs. Both drive the same type of car and both work the same shifts but A works inside the assigned district while B works in the adjacent district. This unfairness to B could be solved by the more complex and expensive radius approach.
   
   
3. Counterproductive. Assigning discounts to short journeys has the undesired effect of discouraging cycling, doubling, moving, pooling, transit-use, trip avoidance, waiting and walking. This problem is worse than the issue of high administration expense that could be seen as a job generator (a benefit).

Mobility credits

There is another solution that is very inexpensive to operate, fair to all regardless of geographic happenstance and encourages cycling, doubling, moving, pooling, transit use, trip avoidance, waiting and walking. Furthermore, this alternate solution compounds pricing signals, and diminishes entitlement signals.

We have a hint about this solution from the Puget Sound Regional Council (Washington State, U.S.) trials:

If you give people money that they can spend on
RUC fees or keep, they attempt to keep some.

I propose providing mobility credits. These could most easily be distributed on a monthly or annual basis to the user of a pay-for-what-you-drive road-use meter and could be managed by a billing services operator. An annual allotment is preferred so that a motorist is not pressured to “use up” credits before month-end. An annual allotment could be used up well in advance or could even be carried over in the event that a motorist managed to avoid driving during chargeable times or on chargeable roads.

A credit distribution associated directly with the meter ensures that the metering device holds attraction for the motorist. For example, if such a meter was charging 5 to 50 cents per mile (depending on time and place) and was the only access to mobility credits, then a $250 annual credit against a $10 per month device usage fee, makes the meter an investment rather than an expense. Note that such credits would be easy for a government-operated tolling scheme to justify since most government schemes already provide free access to most roads.

Assume a vehicle-attached meter (i.e., a telematics sensor) operating as an electronic license plate and producing an anonymous, evidentiary record of road use from which can be generated a billing feed (our firm makes one such system, as an example). Grant each motorist mobility credits (for example, $20 per month – enough to travel 40 to 400 miles depending on time and place charge rates). In this way, a simple per-device accounting credit provides:

1. discounted or free trips for a motorist who drives to shop, to church or to drop kids at school;
   
   
2. an incentive for other motorists, including poorer motorists, who would like to conserve these credits for longer trips or trips that must be made in an automobile and to otherwise avoid, cycle, double, move, pool, take transit, wait or walk.

As we engage in the shift from paying based on fuel consumption to paying based on TDP metering, the question will arise whether meters should be paid for by the motorist, by the government, upfront or over-time. If they are distributed at no charge, mobility credits would make it especially attractive to road users to participate in the system, but the meter itself might not be valued, unless credits continued to be provided. If the meters are to be paid for, mobility credits should cover more than just meter costs to provide a net credit. I believe meters should be paid for over time, as are mobility handhelds, now in order to ease the expense. Such as arrangement would make the system easy for motorists to purchase: they would pay gradually for the meters, while receiving a net credit for their participation. It also makes it easy for a meter operator to finance millions of meters, since there is a guaranteed source of revenue to secure the loan.

Transferable Credits

But why stop at credits just to motorists who use the meter? What granting credits to transit users and cyclists? In the economic-fairness spirit of parking cash-outs that provide an equivalent transportation incentive to employees who do not use free employee parking, mobility credits could be provided to all people of driving age. These could be sold or given to others, creating a market analogous to that for carbon credits. Such an approach provides two valuable signals:

1. the motorist who buys such credits is directly subsidizing some other person to use a non-automotive alternative – or at least to use their automobile on uncongested roads and at uncongested times;
   
   
2. the value of not driving is now rewarded, as opposed to only having the act of driving taxed.

Creating a system on the internet for such an exchange is not terribly difficult. True, not all people have internet access, but most libraries provide access and most people have a friend who could help. What is needed is a unique mobility identifier for each person over driving age. In the extreme, an exchange office could be set up for handling this by mail, but it would be best to avoid such an expense and invest in ensuring that libraries have access and staff who can help new users. This has additional side benefits.

Mobility for all

Is it fair to provide mobility credits only for those over 16? Consider that parents of three- and nine-year-olds likely need to travel additional miles for schools, doctors, sports and the like. Consider also that many families have an older person or a disabled person who does not drive, rather depending on others in that family to drive for them. Mobility credits for every person would send even more cycling/walking/transit signals to a family with a couple of young children, especially if they could sell such credits to other motorists. Similarly, relieving the additional expense burden of transporting an aging family member to medical appointments promotes a greater sense of fairness.

In the balance between road-use charges and credits is the combined opportunity for addressing congestion, emissions and funding issues all while keeping an eye on fairness and political acceptance. Credits say: “we understand you require reasonable access”, while pricing says: “Please take treat that access like the precious resource it is.” Done right, the shift from fuel tax to pay-per-use can provide immediate solutions as well as additional health, lifestyle and urban quality benefits.

Road Pricing for Greenhouse Gas Efficiency

I always prefer to price correctly for congestion and rely on that to address emissions and funding. Nonethless the arguments for pricing away GHGs must still be made. Michael Replogle, once again, does it well (download PDF).